Music Streaming Has a Fraud Problem and It’s Almost Impossible to See

Spotify has a new general counsel, ex-Microsoft lawyer Horacio Gutierrez. He’s stepping right into two class-action lawsuits alleging that the company isn’t paying out mechanical royalties to artists and composers as they should. Once he moves into his office, he’ll find that it’s already occupied by many, many nests of hornets. One of them involves the use of click fraud to bilk streaming companies of out money. It’s out-and-0ut theft.

The problem is that this sort of thing is almost completely undetectable. Quartz takes a look at the situation.

Click fraud—the use of automated digital bots to “click” on payment-generating links and steal money by pretending to be consumers—has long been a problem in the online advertising industry. Websites stand to lose as much as $7.2 billion from fraudulent traffic in 2016, according to a study this January from the Association of National Advertisers.

This is now also a growing problem for the music industry, amid a rapid transition to online streaming services as the primary mode of distributing music and source of royalty payments. In the US alone, the streaming industry is projected to reach roughly $2 billion by 2019. The ascent of services like Spotify, Apple Music, Deezer, and Tidal—along with their per-stream payment models—has created an alluring target for fraudsters who need only a few auto-generated dance tunes and a modicum of coding expertise to fashion bots that basically snatch money out of thin air.
Bloody bots. Keep reading.

 

Alan Cross

is an internationally known broadcaster, interviewer, writer, consultant, blogger and speaker. In his 30+ years in the music business, Alan has interviewed the biggest names in rock, from David Bowie and U2 to Pearl Jam and the Foo Fighters. He’s also known as a musicologist and documentarian through programs like The Ongoing History of New Music.

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